Billion-Dollar Monthly Boost in Buying of Gold ETFs Offers Hope to Gold Investors
Exchange-traded funds backed by gold increased their holdings by $1 billion in October, marking a possibly bullish shift in investor sentiment toward the precious metal.
The ETFs hold physical gold assets, which are equivalent to the fund’s asset value. Investors in the funds don’t own gold directly and thus save on storage costs. The ETFs are constantly buying and selling gold as investors purchase and redeem fund shares.
Gold bars sit across a one kilo gold bar at bullion dealers Goldcore, in London, U.K., on Thursday, March 11, 2010. Photographer: Chris Ratcliffe/Bloomberg
In October, the global ETFs and similar products added 16.5 metric tons, bringing their holdings up to 2,346 metric tons. That’s the first monthly gain in four months, according to data from the World Gold Council, or WGC.
“These numbers are very encouraging,” says George Milling-Stanley, head of gold strategy at State Street Global Advisors, who worked on the 2004 launch of the largest gold-backed ETF, the SPDR Gold Shares GLD.
The numbers “confirm our view that investors are once again turning to gold as a defensive asset, offering some protection against the unexpected, whether these tail risks are macroeconomic or geopolitical in nature.”
Other reasons for holding gold include portfolio diversification, liquidity, relatively low volatility, and improved risk-adjusted returns, he says.
The strong monthly gain in gold ETF holdings follows a net reduction of 103.2 metric tons in the third quarter, according to the WGC. Those were the first quarterly outflows since the first quarter of 2016.
“Flows into gold-backed ETFs are often indicative of investor sentiment in the market, as well as reactionary moves to the price of gold,” says Juan Carlos Artigas, director of investment research at the WGC.
But the market has also “seen inflows into low-cost gold-backed ETFs over the past few months, which suggest there are long-term investors buying gold as a strategic asset,” says Artigas.
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Gold Prices (LBMA AM)
09 Nov: USD 1,219.05, GBP 936.96 & EUR 1,075.81 per ounce
08 Nov: USD 1,223.45, GBP 932.02 & EUR 1,071.01 per ounce
07 Nov: USD 1,235.05, GBP 938.64 & EUR 1,074.62 per ounce
06 Nov: USD 1,234.85, GBP 947.75 & EUR 1,083.58 per ounce
05 Nov: USD 1,231.60, GBP 946.61 & EUR 1,081.96 per ounce
02 Nov: USD 1,235.50, GBP 948.00 & EUR 1,079.83 per ounce
Silver Prices (LBMA)
09 Nov: USD 14.34, GBP 11.01 & EUR 12.63 per ounce
08 Nov: USD 14.49, GBP 11.06 & EUR 12.70 per ounce
07 Nov: USD 14.67, GBP 11.15 & EUR 12.77 per ounce
06 Nov: USD 14.70, GBP 11.25 & EUR 12.89 per ounce
05 Nov: USD 14.74, GBP 11.33 & EUR 12.96 per ounce
02 Nov: USD 14.82, GBP 11.38 & EUR 12.95 per ounce
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